Pensions - Articles - Nutmeg comments on Labour's plans to cap drawdown charges

 “At Nutmeg, we welcome the new pension reforms coming into play next month. We believe giving people choice and control over their future finances is fundamentally the right thing to do. However, some of these changes are quite radical, and as a result allow people more freedom with their savings than ever before, and this can be a scary prospect. Therefore pension savers still need help and support, and part of this is making sure they don’t get ripped off by high charges and confusing cost structures.

  

 “Fees are clearly a crucial component of investment returns, in terms of both accumulation as well as drawing income. Even small increments can have a huge effect over time and so it’s really important that the industry steps up and takes action. Our calculations1 have proven the importance of fees on accumulation too. A £500,000 portfolio earning 5% annual returns and paying 2.4% in fees will grow to around £840,000 over 20 years. But reduce that fee to 1% per year and your portfolio could grow to a staggering £1,178,000.